Mortgage rates improved last week as Wall Street managed news on both sides of the economic coin. There were several instances of higher-than-expected inflation – an event that tends to lead rates higher — but weak domestic jobs data and a soft manufacturing report suppressed the damage.
Rates were also held low by ongoing issues in Greece.
In Greece, the government is currently struggling to meet its debt obligations — despite a restructuring of existing debt negotiated in 2010.
Without a plan for its new debt, though, Greece will likely to default on what it owes. Eurozone and international banking leaders have failed to reach consensus on the situation, and now the citizens of Greece are in a state of social unrest.
The uncertainly surrounding the nation-state spurred a bond market flight-to-quality last week. That, too, helped to keep rates low.
Last week, mortgage rates fell for the sixth week out of nine, a streak that’s dropped conforming mortgage rates in Simpsonville to their lowest levels of the year.
This week, that could change.
Wednesday, the Federal Open Market Committee adjourns from a 2-day meeting and anytime the Fed meets, there’s a good chance that mortgage rates will move. The FOMC makes the nation’s monetary policy.
The meeting adjourns at 12:30 PM ET and Fed Chairman Ben Bernanke will follow with a press conference at 2:15 PM ET. The press conference is meant to give context to the FOMC’s decision, and allow for back-and-forth with the press corps. Wall Street will watch closely, too, for signals of the Fed’s next action(s).
In addition, this week will see the results of May’s Existing Home Sales report and New Home Sales report. Both are considered important to the housing market, and to the economy overall.
If you’re still floating a mortgage rate, falling mortgage rates have helped you. There’s not much room for rates to fall further, however. Consider calling your loan officer and locking something in.
Mortgage rates moved in feverish fashion last week, changing with extreme frequency, and eventually ending slightly worse on the week. Conforming mortgage rates fell to a 6-month low Wednesday but, by Friday, they had retreated higher.
Last week marked just the second time in 8 weeks that rates in Greenville increased. During that span, Freddie Mac reports that mortgage rates have dropped 42 basis points, or 0.42%.
That equates to a monthly savings of $25.24 per $100,000 borrowed.
One reason why mortgage rates have been dropping is that the economy is growing more slowly than projected. In a speech last week, Federal Reserve Chairman Ben Bernanke described the U.S. recovery as “frustratingly slow”. In a separate speech, another Federal Reserve President, William Dudley, categorized the recovery as “subpar”.
Economic weakness tends to promote a low mortgage rate environment as equity markets sell off and investors seek safety of principal. Indeed, the Dow Jones Industrial Average fell for the 6th straight week, its longest losing streak since 2002.
Mortgage rates were also helped by ongoing uncertainty in Greece. The nation remains at-risk for default, and that’s spurring a bond market to flight-to-quality which benefits the U.S. mortgage market, too.
This week, mortgage rates may reverse their recent slide. There isn’t much data due for release, but the numbers that will hit the wires have the ability to move markets — especially the inflation-linked figures.
- Tuesday : Producer Price Index, Retail Sales
- Wednesday : Consumer Price Index
- Thursday : Housing Starts
- Friday : Consumer Sentiment
If you’ve been looking at mortgage rates for a purchase or refinance, now may be a good time to lock. FHA and conforming rates are at their lowest levels since December 2010.
Going forward, rates have much more room to rise than to fall.
Mortgage rates improved last week, carried by the same stories that have led markets better since April.
Worries of a Eurozone sovereign debt default mounted, and the U.S. economy’s revival showed itself to be slower than originally anticipated. In Greece, the nation readied itself for its second bailout in two years. The austerity measures of last year have not worked as planned. There are concerns a default would lead to contagion, delivering the Euro region into an economic tailspin. These fears spurred a flight-to-quality in bond circles to the benefit of U.S. mortgage rate shoppers.
In addition, last week’s U.S. jobs data fell short of expectations, giving another boost to mortgage markets.
There were 3 weak reports:
ADP showed 38,000 private-sector jobs created in May. Analysts expected 170,000. The Department of Labor showed 422,000 Initial Jobless Claims. Analysts expected 415,000. The Bureau of Labor Statistics showed 54,000 jobs created in May. Analysts expected 150,000. Each of these data points underscores the fragile nature of the U.S. recovery, and the weaker-than-expected readings helped mortgage rates improve.
It’s the sixth week of 7 mortgage rates in Mauldin have improved, setting the stage for a new wave of refinances. This week, there is very little new data on which for mortgage bonds to trade. Therefore, expect the stories from recent weeks to continue to dominate headlines. If Greece’s austerity and/or bailout plan is met with investor optimism, mortgage rates should rise. If the plan falls flat, mortgage rates should fall. There will also be chatter about the U.S. debt ceiling, another potentially negative force on mortgage rates.
If you’re floating a mortgage rate right now, consider locking in. There’s a lot more room for rates to rise than to fall.
Mortgage rates improved last week ahead of Memorial Day and a 3-day weekend. Bond pricing ending the week higher, pushing conforming mortgage rates in South Carolina down for the 5th week out of six.
Most economic news reported worse-than-expected. Initial Jobless Claims increased sharply, GDP was unchanged, and Durable Orders posted the largest one-month decline since October. Each of these stories reduced inflationary pressures on the economy, contributing to lower mortgage rates.
However, the main driver for U.S. mortgage rates last week was Europe.
One year ago, Greece pledged to lower its spending, cut its deficit, and reduce the number of public programs and benefits. In economic circles, this is known as austerity. For more than a month, however, despite the austerity measures, there has been concern that Greece will fail to meet its debt obligations.
Last week, that concern spiked. It triggered a flight-to-quality that helped U.S. mortgage bonds, and led mortgage rates lower.
Conforming and FHA mortgage rates are now at their lowest levels in more than 6 months.
This week, the biggest news is May’s Non-Farm Payrolls report. Although, expect for rates to carve out wide ranges from day-to-day. Until the Greece scenario reaches a resolution, Wall Street will be on edge.
- Tuesday : Consumer Confidence, Case-Shiller Index
- Wednesday : ADP Challenger Report
- Thursday : Initial Jobless Claims
- Friday : Non-Farm Payrolls Report
Plus, four members of the Fed have scheduled speeches.
If you’re still floating a mortgage rates, or have otherwise not locked in, luck is on your side. Mortgage rates look poised to fall over the next few days, however, markets have been known to reverse quickly. Therefore, if you’ve been quoted on a rate that looks acceptable to you, you may not want to gamble on mortgage rates falling further.
The safest decision may be to commit to what’s available to you today.